Written Commentary
PRECIOUS METALS
Gold: December gold contracts were little changed overnight. Gold is still finding support from yesterday’s PCE data, which led to a reduction in near-term tightening expectations. However, the strong rise in the dollar overnight and advance in Treasury yields is weighing on the metal’s potential upside, a dynamic which reflects gold’s longer-term outlook amid the Fed’s hiking cycle. While yesterday’s softer core outcome should ease immediate concern that inflation is reaccelerating, consumer spending remained notably firm and the accompanying GDP revisions further strengthen the case for policy tightening in the future. Underlying domestic demand indicators were considerably stronger than the headline GDP figure alone implies. Looking ahead, nonfarm payrolls, ISM manufacturing PMI, and several Fed speakers will continue to shape market expectations of near-term Fed policy, though it is unlikely that the data will be strong enough to recover pre-PCE pricing of a 70% probability of an October hike (now at 33%).
Silver: December contracts are up 1.2% to $61.29.
BASE METALS
Copper: Copper prices on the LME fell 0.9% to $14,287 as limited activity and demand from China due to a national holiday and a stronger dollar weighed on the metal. Recent factory activity data from China showed a modest recovery in growth, although future conditions are likely to be scrutinized for domestic demand signals. Heavy reliance on exports for the industrial sector raises risks to the outlook for copper as geopolitical uncertainty and rising trade frictions play a more dominant role.
Meanwhile, supervisors at world’s largest mine, Chile’s Escondida, rejected offers from the company, paving the way for a potential strike. The potential strike comes amid suspended mining operations last week after a worker was killed in an accident. Meanwhile, two unions at Antofagasta’s Centinela copper mine in Chile rejected a collective contract offer on Monday, paving the way for a strike per Reuters.
Zinc: Zinc lost 1.7% to $3,765.
Aluminum: Aluminum was down 1.3% at $3,130.
Tin: Tin rose 1.0% to $54,450.
Lead: Lead eased by 0.4% to $1,867.
Nickel: Nickel dipped 1.2% to $15,740.
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